What does "freezing my credit report" mean -- and should I do it?

Simply stated, it means that no one, not even you, can access your credit report.

The reason you might decide to do it is to prevent identity theft. When a would-be thief tries to use your credit, their potential creditor will try to access their (your) credit report, and will be denied access – so they'll deny the credit.

"Freezing" is a good idea for many older consumers. They are at an age where they aren't likely to be buying a new home, or even a new car or furniture. They often have several credit cards that they aren't using, and many have good credit. That makes them a good target for identity thieves. Plus, sad to say, many older people are targeted for identity theft because many of them are too trusting. They give information out when they should not.

Should YOU do it? That depends upon your immediate plans. If you’re getting close to wanting to purchase a house or a car, or if you need another credit card, then no, you definitely should not. But if you worry about identity theft and have no impending need to apply for credit, it could be a good plan for you.

The drawbacks are paperwork and fees. You’ll have to pay $10 to each of the three credit reporting agencies: Equifax, Experian, and Trans Union. If you have a spouse, you’ll also have to pay $10 each for your spouse.

There's one exception: you can get a “free freeze” if you’ve already become a victim of identity theft. You’ll have to send a copy of the police report in lieu of money.

Be aware that the credit bureaus aren't going to make it easy. They didn't want individuals to be allowed to freeze their reports, and they fought for 4 years to prevent Congress from passing a bill allowing it. As a result, you’ll have to mail certified letters, present utility bills to prove you are who you are and you live where you live, and give other personal information.

When you decide you need to use credit and want to "thaw" your reports, you’ll have to go through a reverse process. You’ll pay the $10 per person per credit bureau over again.

As an alternative, you can follow your free credit report with a service that alerts you every time anyone accesses your credit, or you can get monthly updates on your report. Thus you'll know quickly and can take steps to stop a thief.

About the author: John Rasor is the owner of http://www.creditscorecowboy.com/. CreditScoreCowboy.com is a great source for free credit reports, free credit scores, fico scores, identity theft software, and free information on how to repair your credit for free.